Market fraud: Thai trader settles USD5.2m case with SEC

pork butts on in the smoker

A Thai stock market trader has agreed to settle a market fraud charge worth USD5.2m and the Thai Ministry of Finance had nothing to do with it. The man allegedly made a 3,400 per cent return based on insider information, which the US SEC spotted, swooped down on and froze within a week of the trades taking place.  This interesting story highlights both the US government’s willingness to pursue insider traders and how efficiently they do it.
Sniffing out processed pork trades
Badin Rungruangnavarat, a trader based in Bangkok, allegedly bought thousands of call options and single stock futures contracts in Smithfield Foods, a pork processing firm based in the US, via the Interactive Brokers LLC, also based in the US. The SEC accused Rungruangnavarat of making these purchases based upon a tip he gleaned from a Facebook comment, from a friend who happens to work at an investment bank and had material and non-public information about the potential acquisition of Smithfield.
Rungruangnavarat was accused of buying the contracts and options between May 21 and 28. On May 29th, Smithfield announced its acquisition for USD4.7bn by a Chinese company. Following the announcement, Smithfield’s share value increased by almost 25 per cent, resulting in the whopping 3,400 per cent return on investment. The Thai trader tried to withdraw more than USD3m in profits from his brokerage account on June 3rd, according to the SEC’s announcement on the matter.
Such a high return, based on aggressive trading and made just before an acquisition announcement would raise red flags for potential market abuse. Perhaps the trader thought being in Thailand would mean the US authorities might not notice his trades, or might not bother to pursue them.
He could not have been more wrong. The US managed to freeze his assets within one week of the trades and, three months later, the trader has agreed to give up the USD3.2m he allegedly made from the trades and pay a USD2m while not admitting or denying wrongdoing, according to a report in the FT.com.But why would anyone cough up the extra USD2m if they were innocent?
Rapid action
One week after the acquisition went public, the SEC in the US had managed to obtain an order which effectively hogtied Rungruangnavarat from the other side of the world. The order froze the proceeds of his securities purchases, granted the authorities expedited discovery and made it illegal for Rungruangnavarat to destroy any evidence. In short, he could not touch his money, had the SEC’s investigators crawling all over his account, and was facing charges if he attempts to hide the electronic or paper trail.
Rungruangnavarat breached  s 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, on Selective Disclosure and Insider Trading, according to the SEC.
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3 comments

  1. When I initially commented I appear to have clicked on the -Notify me when new comments
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    Perhaps there is an easy method you can remove me from that service?
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